Whether humankind fails or succeeds in keeping the rise in global temperatures within manageable levels, central banks will sooner or later be called upon to act, said Benoît Cœuré, a member of the European Central Bank’s (ECB) Executive Board.

“Climate change is not a theory. It is a fact,” Cœuré said in a landmark speech in Berlin on Thursday (8 November).

And “it can be expected to affect monetary policy one way or the other,” he told delegates at a green finance conference organised by the Deutsche Bundesbank and the Council on Economic Policies.

In any event, “the consequences in macroeconomic terms look set to be large,” he warned. If left unchecked, climate change “may further complicate the correct identification of shocks” such as floods, storms, and other extreme weather events, which have an impact on inflation.

“Droughts and heatwaves often lead to crop shortfalls, putting upward pressure on food prices,” Cœuré said, while “hurricanes and floods destroy production capacity, thereby raising input and output prices”.

Europe’s prolonged extreme drought has caused the most severe problems to the EU vegetable sector in the last 40 years, according to the European Association of Fruit and Vegetable Processors (PROFEL).

Climate change will also make some areas of the world less inhabitable, causing migration that will impact wage growth and inflation in host countries, like Germany experienced in recent years, he said.

And “in the more desirable scenario in which humankind rises to the climate change challenge, the implications for monetary policy could be equally far-reaching,” he warned – “in particular if the associated shift in the energy mix changes relative prices to an extent that risks destabilising medium-term inflation expectations.”

For instance, “a faster transition towards renewables, coupled with technological breakthroughs” such as artificial intelligence and autonomous driving could depress inflation to the point where it causes “a downward spiral in prices and wages,” he said.

A rushed transition to clean energy triggered by extreme weather events linked to global warming “will be very expensive” to swallow for the economy, investors warned policymakers at an event in Bratislava last week.

It is not the first time that central bankers worry about climate change. Mark Carney, the Governor of the Bank of England, warned before the COP21 conference in Paris in 2015 that the window of opportunity to tackle global warming was rapidly closing.

The “catastrophic impacts of climate change” – and the financial upheaval created by a sudden switch to a low-carbon economy – will only be felt over a longer period than the three to ten year horizon used in the financial industry, he warned.

“In other words, once climate change becomes a defining issue for financial stability, it may already be too late,” Carney said.

Carney’s warning was later echoed by the European Systemic Risk Board, an EU advisory body set up during the 2008 financial crisis. In a report published in February 2016, the ESRB warned about the risks of moving too late and abruptly towards a low-carbon economy.

“A sudden transition away from fossil-fuel energy could harm GDP” and cause “a sudden repricing of carbon-intensive assets, which are financed in large part by debt,” the report said. If combined with a rise in the incidence of natural catastrophes related to climate change, this could massively raise the liabilities of insurers and reinsurers and destabilise the economy, the report warned.

So far, the economic impact of droughts or heatwaves has been temporary and haven’t pushed the ECB into taking action. “But this may change,” Cœuré said.

“Indeed, I would argue that the horizon at which climate change impacts the economy has shortened, warranting a discussion on how it affects the conduct of monetary policy,” he added.

The concern, he explained, is that central banks may be more often forced to adopt non-standard policy measures, like was the case during the global financial crisis, and – “in the extreme” – force the ECB to “rethink” its approach to monetary policy.

87% of assets managed by the world’s 100 largest public pension funds are yet to undergo formal climate risk assessment, according to research published on Tuesday (23 October), with only 15% of them adopting a coal exclusion policy.

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For instance, “a faster transition towards renewables, coupled with technological breakthroughs” such as artificial intelligence and autonomous driving could depress inflation to the point where it causes “a downward spiral in prices and wages,” he said.

I think a gap might be growing between the moral invertebrates at the top and their own ability to register and vet the lies they incubate in order to widen it. [Not against zero- or negative-inflation, and yes, that needs balls to pull off]

“A sudden transition away from fossil-fuel energy could harm GDP”

If these cretinous delinquents had any ability to do the job inscribed to them; to do something not just for themselves then we might have a future left, a Europe we don’t have to cry about and a return to self-respect rather than the bloated false idolatry and genuine parasitic nature inherent to each and every evil, nasty and selfish shill who thinks they are not understood.

So you don’t like Benny? Apparently he likes children and is kind to animals – but I can think of one or two others who were the same 🙂
He is what he is – these guys come out of a machine – I pity them – not a single original thought in their heads & reflected in what they say – because what they say is what they are. Hope you enjoy my erm…. emission (see below).

I read through the speech. I started with optimism and ended shaking my head & had the thought: “the Bourbons: learnt nothing – forgotten nothing”. The speech is mostly incoherent & pointless. Deconstruction of “highlights” now follows:

“in particular if the associated shift in the energy mix changes relative prices to an extent that risks destabilising medium-term inflation expectations”

Most RES generation in the “right place” is at grid parity given this why would it “risk destabilising medium-term inflation expectations”?

Mr Coeure talks about…. “central banks themselves to play a supporting role in mitigating the risks associated with climate change while staying within our mandate” ….but at no point outlines what the ECB could/should do. Hint: one of the things central banks “do” is print money. Oddly – this never appeared at any point. QE? Green QE? – nope – nada.

As one read through I was like reading a tract from the Bundesbank. I often joking refer to the ECB as the “European Centraal Bundesbank” this extract suggest why: “German growth in the third quarter is currently projected to have stalled or even contracted, probably largely due to bottlenecks in the testing process under the new Worldwide Harmonised Light Vehicles Test Procedure”

& that’s bad why? Oh hang on – the usual (mostly German OEM suspects) had been gaming the system with respect to car emissions – got found out – EC pulls out new testing process and …. German cars sales stall & from an ECB perspective – that’s bad?

suggestion to Mr Coeure – get a perspective & if you can’t do that – get another job.

It does get better – let’s try this: “Catastrophic climate change could thus test the limits of how far monetary policy can go and, in the extreme, force us to rethink our current policy framework.” gee…… do you really think so? So go on Benny, tell us what you plan to do (spoiler alert: Benny and the ECB have ………..no rethink & no plan – or nothing one can parse from what he says).

It gets weird at this point: “……., the marginal cost of harvesting renewable energy may become considerably lower and more stable than in the current regime, in which changes in the effective supply of oil have been a recurrent source of disruption”
I hate to tell you – Benny – but oil is not used to generate electricity. Gas is – but the link between oil & gas prices is increasingly tenuous. Thus changes in the supply of oil have little impact on the electricity prices. Maybe you need better analysts? My prices are very reasonable – just saying – be sad if you kept making a public idiot of yourself. man of your erm… “standing”.

It gets even more strange when Benny links more RES with falls in the cost of energy (and thus inflation ). Maybe central bankers have a “unique” way of looking at the world – as an engineer – I can see some changes in energy prices but for the most part quite small.

Benny briefly talks about the “energy transition” – but skirts around what this might entail – & certainly does not go into any kind of detail on the levels of investments needed to make peoples homes warm and comfortable.

This extract was interesting and an North American Indian in the 19th century being offered a blanket (infected with something interesting) would doubtless recognise the similarity being the nature of the “transactions”

“the ECB, acting within its mandate, can – and should – actively support the transition to a low carbon economy, in two main ways: first, by helping to define the rules of the game …………….without prejudice to price stability”

A long as the ECB can define things and keep prices stable – everything else is secondary. Yawn.

At this point – dear readers – I started to lose the will to live – possibly Benny’s intention when getting his minions to write the speech. However, finishing on a positive note – it is clear that the ECB is still focused on inflation, inflation and not forgetting …. inflation. Everything else, including the planet comes secondary. Benny – the floor is yours.